Sally and Alicia currently are general partners in a business located in Atlanta,Georgia.They are content with their current tax situation but are both very uncomfortable with the unlimited liability to which they are each subjected.Which form of business entity should they consider to replace their general partnership assuming they wish to remain the only two owners of their business? Whichever organization they select,they wish to be treated equally.
A)sole proprietorship
B)joint stock company
C)limited partnership
D)limited liability company
E)corporation

Question

Quizplus · Accepted Answer

A limited liability company is a business entity that provides the limited liability protection of a corporation while allowing the owners to be taxed on their personal tax returns (like a partnership). As an LLC, Sally and Alicia would not be personally responsible for the debts and liabilities of the company beyond their initial investment. Furthermore, LLCs have flexibility in their management and ownership structure, allowing Sally and Alicia to be treated equally as they desire. The other options presented (sole proprietorship, joint stock company, limited partnership, and corporation) do not address the unlimited liability issue that Sally and Alicia are concerned about or do not provide equal treatment to both partners.

Sally and Alicia Currently Are General Partners in a Business